Fabulous attack on neoclassical economics by Anatole Kaletsky

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Economists are the forgotten guilty men

Academics — and their mad theories — are to blame for the financial crisis. They too deserve to be hauled into the dock”

So begins Ana­tole Kalet­sky’s essay in The Times for Feb­ru­ary 5 2009. He is spot on. Eco­nom­ic the­o­ry played a direct role in this cri­sis, by legit­imis­ing the dereg­u­la­tion of finance and encour­ag­ing the prof­li­gate lend­ing of finan­cial insti­tu­tions. There is much more that is wrong with the the­o­ry that dom­i­nates aca­d­e­m­ic economics–known as “neo­clas­si­cal economics”–enough to fill sev­er­al books. My Debunk­ing Eco­nom­ics : the naked emper­or of the social sci­ences was one such book; in it I tried to explain all the tech­ni­cal flaws in eco­nom­ic the­o­ry to a non-math­e­mat­i­cal audi­ence.

Talk Tonight & Today Tonight

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The Today Tonight seg­ment has been delayed till this evening (Wednes­day Feb­ru­ary 4th)–which is a pity in a way because I will also be speak­ing at a pub­lic forum tonight at Cir­cu­lar Quay organ­ised by the Prop­er­ty Knowl­edge Forum: An excerpt from the pro­mo­tion­al fly­er:

ARE WE HEADING FOR A DEPRESSION?

When will the bot­tom hit? Are we in store for 40% drops in prop­er­ty or has the recov­ery already begun?

Today Tonight on possibility of Depression

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Chan­nel Sev­en’s Today Tonight is doing a piece on whether we might face a Depres­sion, and if so what it might be like. It should go to air tomorrow–Tuesday Feb­ru­ary 3rd.

They have inter­viewed me for analy­sis, and Eric Aarons–who lived through the Great Depres­sion and at 90 is still a dynam­ic sculp­tor and author.

They also want to speak to any­one who has lost their job recently–specifically if pos­si­ble as a result of the glob­al finan­cial cri­sis.

So if any­one out there is will­ing to speak on cam­era about it, please con­tact the jour­nal­ist James Thomas:

Steve Keen’s DebtWatch No 31 February 2009: “The Roving Cavaliers of Credit”

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Click on Marx’s image to down­load this post in PDF for­mat

Talk about cen­tral­i­sa­tion! The cred­it sys­tem, which has its focus in the so-called nation­al banks and the big mon­ey-lenders and usurers sur­round­ing them, con­sti­tutes enor­mous cen­tral­i­sa­tion, and gives this class of par­a­sites the fab­u­lous pow­er, not only to peri­od­i­cal­ly despoil indus­tri­al cap­i­tal­ists, but also to inter­fere in actu­al pro­duc­tion in a most dan­ger­ous man­ner— and this gang knows noth­ing about pro­duc­tion and has noth­ing to do with it.” [1]

A China Tale

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I’ve just been inter­viewed for an SBS News piece on Chi­na (for non-Aus­tralian read­ers, SBS is Aus­trali­a’s mul­ti­cul­tur­al tele­vi­sion sta­tion, and its news has a strong inter­na­tion­al focus).

Ordi­nar­i­ly I don’t com­ment on Chi­na, because I don’t know enough about their econ­o­my right now–except to deride the belief that was pop­u­lar in Aus­tralia last year that our exports to Chi­na would insu­late us from the glob­al down­turn. “Decou­pling” they called it–China was sup­posed to have its own inter­nal growth dynam­ic that would mean it would con­tin­ue grow­ing and buy­ing our raw mate­ri­als even as the OECD tanked. This theory–ironically spout­ed by the same peo­ple who once tout­ed that the world is now glob­alised and every­thing affects (and ben­e­fits) every­thing else–is now rather less pop­u­lar as Chi­na’s growth has slowed.

DebtWatch No 29 December 2008

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What’s Real­ly Going On? or…

Why Did I See it Com­ing and “They” Did­n’t?

Part 2: The Mod­els

But this long run is a mis­lead­ing guide to cur­rent affairs. In the long run we are all dead. Econ­o­mists set them­selves too easy, too use­less a task if in tem­pes­tu­ous sea­sons they can only tell us that when the storm is long past the ocean is flat again.” (Keynes, A Tract on Mon­e­tary Reform, 1924)

In last mon­th’s Debt­watch, I explained why the data side of why the “Finan­cial Insta­bil­i­ty Hypoth­e­sis” enabled me to pre­dict this cri­sis, long before con­ven­tion­al “neo­clas­si­cal” econ­o­mists had any idea it was approach­ing.

Parliamentary Library Vital Issues Seminar

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The Par­lia­men­tary Library arranged a debate between myself and Rory Robert­son of the Mac­quar­ie Group on the finan­cial cri­sis today. We had a good audi­ence of about 70 Par­lia­ment House denizens. You can down­load the Pow­er­point Slides slides for my pre­sen­ta­tion, and the Vis­sim mod­el of Min­sky’s Finan­cial Insta­bil­i­ty Hypoth­e­sis which was part of the pre­sen­ta­tion ( Right click and choose “Save As” since this is a text file; then install the view­er, which can load the file and let you run it (I’ve also loaded the EXE file of the view­er onto my site as anoth­er way of get­ting the pro­gram). You can make changes too, but they can’t be saved).

Reality Bites in Australia’s Savage Rate Cut

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Yes­ter­day the RBA (Aus­trali­a’s Cen­tral Bank) cut its reserve rate by three quar­ters of a per­cent, to 5.25 per­cent. This is the third cut in 3 months, bring­ing the cumu­la­tive reduc­tion since Sep­tem­ber to 2 per­cent

This is a far cry from the RBA’s expec­ta­tions in 2007, that in 2008 it would be rais­ing rates to con­strain a boom­ing econ­o­my and bring infla­tion back down to its tar­get range.

Infla­tion is still above its tar­get, but clear­ly that’s a bulls eye the RBA is no longer aim­ing for. What on earth went wrong with the RBA’s pre­dic­tions for 2008?

DebtWatch No 28 November 2008: What is Really Going On?

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2nd Anniver­sary Issue…

Why Did I See it Coming and “They” Didn’t?

The finan­cial cri­sis is wide­ly accept­ed as hav­ing start­ed in August 9 2007, with the BNP’s announce­ment that it was sus­pend­ing redemp­tions from three of its funds that were heav­i­ly exposed to the US secu­ri­ti­sa­tion mar­ket (click here for the BNP August 9 2007 press release).

Just three months before­hand, the OECD released its 2007 World Eco­nom­ic Out­look, in which it com­ment­ed that:

Debtwatch 27 October 08: The Failure of Central Banks

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Just two years ago, Cen­tral Banks appeared tri­umphant. Infla­tion, the scourge of the 1970s and 80s, appeared dead, the finan­cial cri­sis of the Tech Wreck had been con­tained, economies world­wide were boom­ing, and stock mar­kets and house prices were spi­ralling ever upwards.

Then along came the Sub­prime Cri­sis, and we received a rude reminder of why Cen­tral Banks were cre­at­ed in the first place: to ensure that the world would nev­er again expe­ri­ence a Great Depres­sion.